Free Gift Letter for Mortgage Template

A Gift Letter for a Mortgage is an affidavit that acknowledges money was given to a buyer by a relative for a down payment or other property-related expenses.

The Gift Letter for a Mortgage verifies that the funds gifted are not a loan, and that the donor does not expect repayment.

The definition of a relative can vary depending on the type of loan being taken out, but usually refers to:

• Children
• Spouses
• Parents
• Grandparents or great-grandparents
• Siblings
• Aunts or uncles
• Domestic partners

There is no set way to write a Mortgage Gift Letter. Standards and regulations may vary by jurisdiction. Below is an example of a typical Gift Letter for a Mortgage template.

A Gift Letter for a Mortgage is used anytime gifted funds are part of the home-buying process.

Lenders require this letter as a guarantee that the gifted money does not need to be repaid to the donor, and thus will not affect the borrower’s ability to repay the mortgage.

The letter confirms the gift is unconditional and that there are no conflicts of interest involved. This helps maintain transparency and supports the borrower’s financial stability in the eyes of the lender.

Gift Letter Regulations

Gift Letter regulations vary based on the type of property being purchased. If it will be your primary residence and a single family unit, your entire down payment can be gifted.

However, other types of property have different regulations, which can vary by lender. Some of the common regulations you should be aware of include:

• Secondary residence or a 2-4 unit primary residence: You must contribute a minimum of 5% of your own funds if the loan-to-value (LTV) ratio exceeds 80%.
• Investment property: You cannot gift funds for the purpose of buying investment properties. All funds must come from the borrower.

When you’re drafting a Mortgage Gift Letter, it is essential to include specific information to ensure the document meets legal and lender requirements. Here are the key elements to include:

• Donor Information
• Recipient Information
• Gift Details
• Signatures

Including these elements ensures that the gift letter is comprehensive and acceptable to lenders, which will facilitate a smoother mortgage approval process.

Writing a Gift Letter for a Mortgage involves several important steps to ensure it meets lender requirements and legal standards. Follow these steps to help you write your letter:

Include donor information: Begin by including the donor's full name, address, and contact details. Add recipient information: Provide the recipient's full name and their relationship to the donor. Explain the gift in detail: Specify the exact amount of the gift and the date of the transfer. Additionally, disclose the source of the funds, including the institution name and account details if necessary. Include donor affirmations: The donor must affirm that the funds are a genuine gift with no expectation of repayment, no conditions attached, and no conflicts of interest. Validate the gift letter: The Gift Letter must be signed by both the donor and recipient to be considered valid. Attach Supporting Documents: Provide any necessary documentation, such as bank statements or transfer receipts, to substantiate the gift and its source.

Use our Gift Letter for a Mortgage template as a reliable foundation to help you during the writing process.

If you have any doubts or want to ensure your gift letter meets legal requirements, it is recommended to consult with a legal professional or financial advisor.

Both the donor and recipient must consider the possible tax implications of Gift Letters.

The annual exclusion for gifts is $18,000 per person. This means a donor can give up to $18,000 to a recipient without having to report the gift to the IRS.

If a gift exceeds $18,000, the donor must file IRS Form 709 (United States Gift (and Generation-Skipping Transfer) Tax Return). This form documents the gift and applies it against the donor's lifetime exemption.

The donor won't owe taxes if their total lifetime gifts are below the lifetime exemption, which is over 12 million dollars.

Generally, the recipient of a gift does not owe taxes on the amount received.

Both parties need to ensure all necessary documentation is completed to avoid any potential issues.

There are several other real estate documents that may interest you if you are drafting a Gift Letter for a Mortgage. These include:

• Real Estate Purchase Agreement
• Land Purchase Agreement
• Quitclaim Deed
• Warranty Deed